It's so easy to shrug off saving for retirement when it seems so far away. However, that delay can be detrimental to your wealth. The three simple principles illustrated below demonstrate why it's never too early to begin investing for your retirement.
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There's no escaping inflation.
Inflation can quickly erode the purchasing power of a retirement nest egg. To equal the value of $100 today, you'll need $134 in 10 years and $181 in 20 if inflation maintains an annual rate of just 3%.
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| Years |
2% Inflation |
3% Inflation |
4% Inflation |
| 10 |
$122 |
$134 |
$148 |
| 20 |
$149 |
$181 |
$219 |
| 30 |
$181 |
$243 |
$324 |
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Time is on your side.
Suppose you need to accumulate $500,000 for retirement by the time you turn 65. Even in an investment that could earn 10% a year, putting it off until you're 50 means socking away some $1,192 a month. Beginning at 35 requires a monthly investment of just $230.
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Give your money a head start.
The sooner you begin investing your money, the longer it will be working for you and your retirement. Again, consider the difference a few years can make.
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Susan put $2,000 into an IRA each year for 10 years, beginning at age 30. She then watched her investment grow until retirement at age 65.
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| Total investment: |
$20,000 |
| Annual cumulative return*: |
10% |
| Total investment value at age 65: |
$417,879 |
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Timothy, on the other hand, put $2,000 into his IRA each year for 25 years, but he didn't start until he was 40.
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| Total investment: |
$52,000 |
| Annual cumulative return*: |
10% |
| Total investment value at age 65: |
$240,200 |
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As you can see, Timothy had invested more than twice as much money as Susan, for more than twice as many years. Yet the total value of his IRA was far less than hers due to the "magic of compounding" that time put on her side.
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For more information - consult a financial professional
For more information about saving for retirement, make an appointment with a financial professional today.
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| *This example is for illustrative purposes only and does not represent actual performance. It assumes a fixed rate of return and a guaranteed principal. Actual rates and principal value will vary. |
